Planning To Get A Car Loan: Here’re The Facts That You Need To Consider First

Most people want to drive their own car, but they have the financial means to do so all at once. Car loans fill in the gaps by enabling you to buy your dream car by only paying a portion of its price in EMIs per month. If you're thinking of getting a car loan, consider the following considerations to help you get a decent offer.

Compare the loan rates and amount

Compare the two choices first if a dealer gives you the alternative of a rebate or a lower interest rate on a loan. Interest rates on car loans currently start at 7.15 percent a year and go up from there, based on the car model, repayment potential, employer, and other factors interest rates on a car loan vary. Since many banks & NBFCs offer competitive car loan interest rates to their regular borrowers, check with the current bank/NBFCs first for those deals and then equate them to the rates provided by other lenders.

Until making a final decision, make sure to check out the rates provided by the financing firms or banks. While certain lenders can fund up to 100% of the price of your car, choose a smaller loan amount to save money on interest. That being said, do not use your savings or redeem your long-term savings by doing so, since this may have a negative effect on your financial wellbeing in the potential. Plan ahead of time to invest and raise sufficient funds to make a substantial down payment and mitigate the loan's stress.

A must-have look on credit score

Your credit score has a strong effect on the interest rates you pay on a car loan. While processing your car loan application, lenders will take your credit score in to account. Someone with a credit rating of 750 or higher has a better chance of getting a loan with a lower rate of interest. As a result, before applying for a loan, check your credit score first. By checking your credit score you'll know your credit score in advance and can take action to boost it. You may also get pre-approved car loan deals depending on your credit score and other eligibility criteria. It's also wise to pay off your credit card balances so that you're only using about 30% of your total credit limit on your card.

Must go for a pre-approved car loan

A pre-approved loan is one that a bank provides to an existing customer without the individual having to apply for it. Banks typically allow this deal to long-term customers with a strong credit history. The bank already has the records and is familiar with your credit background since you are a current customer. As a result, you won't have to go through the hassle of compiling documents, and loan application forms. It's about as painless as a loan should be. You will get funds almost instantly because the loan has already been accepted. There will be no need to wait and worry as well. For a pre-approved loan, you're more likely to get a higher loan amount because the bank already ensures you're creditworthy. Pre-approved loans also have the cheapest interest rates and processing fees. It is not only an easier but also a less expensive loan. A dealer may also have a good loan bid than your pre-approved rate, but if you're pre-approved, you're more qualified to get a better bid.

Must look at loan-related charges and restrictions

Paying your car loan in advance is a smart thing because it lowers your interest rate. Car loans with fixed interest rates, on the other hand, normally come with prepayment or foreclosure fees. Some lenders can also impose a limit on the amount and size of prepayments that may be made in a given year and/or over the course of the loan's duration. As a result, while choosing a lender, look for one that has low fees and other prepayment restrictions. If a dealer agrees to reimburse the current car loan, contrast the cost and terms of the new loan to their prior deal or your pre-approved loan amount. Car dealers will also promise to pay off a former car loan, but either raise the rates of the new loan to cover the expense of the previous loan or even apply charges on the previous loan. Dealers may also bundle the cost of the car you're purchasing, the cost of the loan you're taking on, the price of any car you're buying in, and the cost of additional services into one, make sure that you are aware of these facts before taking a car loan. 

Understand the ‘Fine Print’

You will be faced with a plethora of car loan clauses in your auto loan deal during the satisfying period of buying a new or used car. Understanding these terms, as well as the fine print involved with them, is essential to know that the current deal is precisely what you were guided to conclude it would be when you accepted it. This fee is charged by lenders to offset the costs of processing your loan application. This is normally a one-time fee that cannot be refunded. That being said, make sure that those lenders aren't charging a higher interest rate or other fees to cover the processing cost cut or waiver.

Must check your paying EMI capability

In addition to the rate of interest levied, the EMI amount is determined by the loan amount and the loan tenure. Subtract your required monthly costs, current EMIs, and other ongoing investments from your monthly salary to determine your EMI flexibility. While a higher EMI will undoubtedly result in lower interest rates, do not do so at the detriment of your nest egg or savings.

Use a Personal Loan EMI calculator to calculate your monthly EMI  and plan your loan effectively.